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Don’t Have A Lot of Assets? 3 Reasons You Still Need An Estate Plan

I often hear from Clients that they do not believe they need an estate plan because they don’t have much. However, even small estates can greatly benefit from planning ahead. Failing to plan can be costly and cumbersome to your loved ones when you pass. Here are the top 3 reasons for setting up an estate plan today!

1. You Have Minor Children

If you have minor children do you know what would happen to them if something were to happen to you and/or your spouse? If you do not have a plan in place your children could be placed in DHS custody. They likely would eventually be placed with a family member, if available, but a Judge would have to make that determination. Also, there could be a lengthy and costly custody dispute that may not end up the way you would have chosen. At a very minimum you should have a will with guardianship provisions that details who would care for your children in the event you are unable to do so. Additionally, careful planning can offer added peace of mind by ensuring that your children’s needs will be met and protected for their future.

2. Avoiding Probate

Even if your estate is not large you will likely still be subject to probate. Currently in Oklahoma any estate valued in excess of $175,000.00 is subject to probate. Probate, on average, can take between 6 months and 2 years and can cost between 2% – 5% of your estate value. That can be significantly more than it costs to set up a Trust now. Plus by having a Trust your family is able to avoid the hassle of going through the probate process.

3. Making Your Own Choices

What if you suddenly were unable to care for yourself or make your own financial decisions? What about medical decisions? Would you want to be kept alive on a ventilator? Would you want to be placed in a nursing home or have in home care? How do you want your assets to be divided? While Oklahoma Judges and State Statutes can determine the answers to the above questions it will not likely turn out how you would want it to. Additionally, it will cost you and your family more time and money to have a Judge make these decisions for you. Be proactive and make your own choices.

For more information call me for a FREE consultation at (918)899-7949 or visit my website grovelegalservices.com.

Critical Information For All Parents of Children With Disabilities

This Article is written by Tulsa Estate Planning Attorney, Breanna Grove

One often overlooked area of estate planning is planning for individuals with disabilities. However, this is a very critical area in which failing to plan can have devastating results such as loss of Medicaid, Social Security, or other income based governmental assistance programs that are essential for the lifelong care of individuals with disabilities. Setting up a Special Needs Trust can help ensure that an individual with disabilities does not become disqualified from receiving their government benefits. Special Needs Trusts also help the disabled individual to have access to resources to pay for treatment or therapies that might not be covered by Medicaid or simply to provide comforts to increase their quality of life without compromising their eligibility for government resources.

If you have a child with a disability and you have private insurance, you might not see the importance of planning at this moment. However, let me give you a couple of examples of why setting up a Special Needs Trust right now is very important.

Example 1: Robert is 19 and has Down’s Syndrome. He has been working for his parent’s business since he was 13. Instead of paying Robert directly, his parents invested money into a Roth IRA for his benefit. His parents thought they were doing the best thing for Robert. However, because Robert owns more than $2,000 in assets he fails to qualify for public assistance. Robert is forced to spend down his Roth IRAs and pay penalties. Then, Robert is subject to a look back period of 36-60 months to determine whether a “transfer for purposes of benefit qualification” was made. If so, he could be ineligible for public benefits for a set amount of time or until he pays a certain amount of money for his own care depending on the particular program at issue.

Example 2: Sam and Rita have a 5 year old, Rachel who has Autism. Sam and Rita did not do any type of estate planning. Sam and Rita are involved in an accident and both are killed. Rachel does not have a guardian and might be placed in DHS care until a proper guardian can be determined by the Court. This would likely be a very traumatic experience for her. Additionally, Sam and Rita’s estate will have to be probated which could tie up money needed to support Rachel. Rachel will likely inherit their entire estate after all expenses and creditors have been paid. However, since she is a minor the probate Court will set up a Trust for her benefit that will pay her the entire amount at 18 . Even if the probate court allows a special needs trust to be set up after her parents death, it will be considered self funded and Rachel’s estate will likely be required to pay back various public assistance programs with any money remaining in the trust after her death. Finally, her inheritance might make her ineligible for some assistance programs now or after she reaches 18 and receives her inheritance.

1) Estate Planning – Having everything taken care of in case something happens to you as parents gives your family members who would likely step in as guardianships or a Trustee a clear plan. It also saves them the burden of having to figure out all of these critical decisions at what would likely be a very emotional and stressful time.

2) Third Party Funding – It is much more beneficial for parents or other 3rd parties to fund the Special Needs Trust. A self funded trust will likely be subject to look back periods and payback requirements.

3) Gifts or Inheritances – If a child receives any gifts or inheritances it can be placed in the Special Needs Trust. This will insure that the gifts or inheritances are properly managed for the child and that the child will not own assets that may cause them to be disqualified from public assistance programs when they are older.

4) Life Insurance – Life insurance can be a very important tool in long term planning for a child with disabilities. The Special Needs Trust can be listed as the beneficiary of the life insurance policy and can help manage the policy. Additionally, minors can not be listed as beneficiaries of a life insurance policy which creates additional issues that are resolved by having the Special Needs Trust listed as the beneficiary.

Planning early is critical and can help ensure that your child’s needs will be met and that they will not become disqualified from public assistance programs. Even if you do not plan on funding the Trust until after your child turns 18 or until after your lifetime, having something in place is a very good idea.

For more information please feel free to give us a call! Grove Legal Services, PLLC 918-899-7949 or visit our web site GroveLegalServices.com.

Five Things You Need to Know About Estate Planning to Protect Your Family

Failing to plan for your future can lead to undesirable results. Most people understand that if they don’t have a will or trust in place at the time of their death that their property might not be distributed according to their wishes. However, many people are unaware that if they don’t have an estate plan in place:

1) Their children could be placed in DHS custody while the Courts determine guardianship;

2) They could end up in a nursing home while the Courts attempted to sort out guardianship issues for the individual;

3) They could be kept alive on life support for an extended period of time;

4) Their family could have to endure a timely and costly probate process after they pass; and

5) Their life insurance proceeds could not go to their minor children, so they would have to rely on their designated beneficiaries to provide for their children with no legal obligation to do so.

Don’t let these unfortunate consequences happen to you. All of these undesirable results can be avoided by careful planning.

Wills

By having a will in place you can make sure that your property is distributed according to your wishes and you can chose guardians for your minor children. The downside of a will is that it has to be probated which can be costly and time consuming.

Trusts

A trust will allow you to make sure that your property is distributed according to your wishes and avoids probate. A pour-over will is created along with the trust and can address guardianship of your minor children.

Durable Powers of Attorney

A durable power of attorney allows you to appoint someone to take care of your finances, personal, and business affairs in the event of your incapacity. Most of the time guardianship provisions are also included so that in the event of your incapacity the guardian of your choice could make decisions regarding your care.

Health Care Directive

A health care directive allows you to make decisions regarding your medical care. You can determine what, if any, life sustaining treatments you would want and whether or not you would like to donate your organs. It also allows you to appoint a health care proxy to make medical decisions on your behalf. However, your health care proxy cannot make decisions that conflict with the decisions you select regarding life sustaining treatment.

Top 3 Reasons Every Parent of Minor Children Needs An Estate Plan

Do you really need an estate plan? If you have minor children, the answer is yes. Even if you don’t have a lot of assets, if you have minor children you at least need to have a will with guardianship provisions. However, to make sure that your children are provided for financially, it is best to have a Trust as well. In this article I will discuss the top 3 reasons every parent of minor children needs to have an estate plan.

1. To ensure that your children are taken care of by the person(s) of your choosing.

If something were to happen to you and your spouse and you do not have a plan, your children could be at risk of being temporarily placed in DHS custody until a suitable temporary guardian could be appointed by the Court. Then, your children would likely remain with the Court appointed temporary guardian until a permanent guardian could be appointed. If guardianship is contested this could be a lengthy process and your children could remain unsettled for quite some time.

If you have a will with guardianship provisions you can chose who will be the guardian(s) of your children if something happens to both you and your spouse. The children would immediately be placed with their guardian(s) and you would avoid the traumatic experience of their being placed with strangers or being shuffled around after such a tragic event.

2. To know that your children’s financial needs will be met.

If you don’t have a Trust, your assets will have to be probated by the Court. Probate is a timely and costly endeavor and your assets could be tied up between 6 months to 2 years. If you have a Trust your assets will immediately be available for your Trustee to use to provide for the needs of your children.

Additionally, minors cannot be listed as beneficiaries of life insurance policies and cannot receive an inheritance. With respect to a life insurance policy, do you trust that the beneficiary you listed would provide for your children? Even if you are confident that your listed beneficiary would provide for your children, there would likely be negative tax consequences on that individual for receiving the proceeds of your life insurance. With a Trust in place, the life insurance money can be held in the Trust for the minor beneficiary and can be used to provide for their care.

With respect to your other assets, if there is not a Trust in place, the probate Court would require the money be placed in Trust for the benefit of the children. When your children turn 18, they would be entitled to the entire sum of money which is discussed further below under reason number 3. In the event that your children need money for health, education, etc. the Court would have to be petitioned and the Judge would determine if those needs should be met. However, if you have a Trust your Trustee can decide whether or not to use any Trust assets to provide for all of your children’s needs without having to involve the Courts. The Trustee has much more flexibility and can provide for needs such as a vehicle or discretionary items that a Court may not approve.

3. To protect your children’s inheritance.

A large majority of my clients do not want their 18 year old to receive their entire inheritance, especially an 18 year old who no longer has parents to help them out financially. If you have a Trust you can provide provisions that stagger the payments to minor beneficiaries over a number of years and allow portions of the inheritance to be paid out after particular milestones such as graduation from college. Additional protections can also be included wherein the Trustee has discretion to make the payments in the event your child is involved in a lawsuit, divorce, or has some other life event occurring wherein it is not a good idea for that individual to receive a portion of their inheritance.

What Does Estate Planning Really Mean?

When most people hear the term “estate planning” thoughts of the ultra wealthy trying to pass on a legacy to their heirs is often conjured up. However, while occasionally that is the case, the vast majority of my clients are average people of moderate means simply trying to make sure that their children will be taken care of, that their family will not be tied up in probate, and that things will be distributed and wound up as quickly and effortlessly as possible upon their passing or incapacitation.

An Estate Plan is defined as “Written document setting out an estate owner’s instructions for disposition and administration of his or her property at his or her death, incapacity, or total disability”.[i] In simple terms, this means a piece of paper (or papers) that states who will get what and how things are to be taken care of when a person dies or can no longer make their own decisions. An estate plan allows a person to clearly set out what will happen to their belongings and children when they pass. If a person dies without an estate plan (intestate), then their property will be distributed according to the laws of the state(s) where they reside and/or own property. People are often very surprised how their property would pass under state law. [ii]

One of the most common documents used in estate planning is a will. A will allows a person to state how their possessions will be managed and distributed upon their death. Additionally, a will can contain guardianship provisions which states who will care for their minor children if something happens to both parents. Wills are great planning tools for young families who do not have a lot of assets and do not have the financial means to get a trust set up. However, the major downside of wills is that they have to be probated.

Probate is the process wherein the Court concludes your affairs upon your death. If you have a will, the Court oversees the administration of your will and makes sure that your creditors are all paid and that your assets are distributed according to the terms of your will. There is an opportunity to contest the will during probate. Probate is a very time consuming and costly process. On average probate takes from 6 months to 2 years to complete and costs 5% of your estate value. So, for example, a $200,000.00 estate would cost $10,000.00 to probate. Additionally, probate is a public process. Anyone can see exactly what assets you had and how they were distributed.

Another common document used in estate planning is a Revocable Living Trust. A Revocable Living Trust is created while a person is living and can be changed at any time during the lifetime of the person who created the Trust. The person(s) who set up the Revocable Living Trust can continue to use the trust assets during their lifetime and can set the rules for distribution of the assets to the persons of their choosing upon their death. Revocable Living Trusts are flexible, offer many options, and avoid probate. Additionally, pour-over wills almost always accompany a Revocable Living Trust and can contain guardianship provisions to determine the care of minor children.